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SECURE ACT Changes to IRAs You Should Know...
The SECURE Act took effect Jan. 1. The changes to IRA provisions, set forth below, may impact any number of types of IRA (e.g., traditional, Roth, inherited, deemed, Simple and SEP).
Post-Death Minimum Required Distributions Accelerated—Elimination of the Stretch IRA
New Rules: In general, distributions after death of the IRA owner must be made by the end of the tenth calendar year following the year of death. However, payments can be made over the beneficiary’s life expectancy, if the beneficiary is (1) a surviving spouse, (2) a disabled or chronically ill individual (or certain trusts for such persons), (3) a beneficiary no more than ten years younger than the IRA owner, or (4) a minor child of the IRA owner (generally, until the child reaches majority). (The existing rules appear to still apply for nondesignated beneficiaries.)
Straight Talk - Uncle Sam wants his share and now he knows he will get it within 10 years of your passing.
Eliminate Age Limit on IRA Contributions (and Deductions)
New Rule: There is no longer an age limit on traditional IRA contributions, nor an age limit on deductions for such contributions. The Act also provides for rules for coordinating the impact on qualified charitable distributions (QCD) for post 70-1/2 contributions. Specifically, it provides that the exclusion from income for a QCD is reduced (but not below zero) by the excess of (1) aggregate amount of post age 70-1/2 deductions allowed, less (2) aggregate amount of such reductions counted in the prior years.
Straight Talk - We're living and working longer than ever before, also that we want to help others as well.
Lifetime Minimum Required Distributions Delayed
New Rule: Age 70-1/2 is replaced with age 72.
Straight Talk - The withdrawal rate went up, so you'll have to take a higher % at 72 now then you did before, but you get to hold for an extra year or so.
Tax Relief for Withdrawals for Child Birth and Adoption Expenses
New Rule: IRA (and employer plan) withdrawals of up to $5,000 for child care and adoption expenses incurred within a year following birth or legal adoption are not subject to the 10% additional early withdrawal tax under Code section 72(t). These amounts may also be recontributed back to the plan or IRA subject to certain limitations.
Increased IRA Withholding Notice Penalties
New Rule: The penalty is increased to $100 per failure, with a maximum annual penalty of $50,000.
Straight Talk - Big Brother will be watching to make sure you take your RMD with more scrutiny
Expanded Definition of IRA Compensation to Include Foster Care Payments
New Rule: Foster care payments that are excludible from income under Code section 131 (called “difficulty of care” payments) are counted as eligible IRA compensation for purposes of the nondeductible IRA contribution limit.
Expanded Definition of IRA Compensation to Include Graduate School Stipends and Fellowships
New Rule: Amounts includible in income and paid to aid individuals in their pursuit of graduate or postdoctoral study or research are counted as eligible compensation for IRA purposes.
GOT QUESTIONS? ASK US. WE CAN HELP WITH THAT!
The ARIES Foundation for Financial Education, Inc is a nonprofit dedicated to the mission of trying to help everyone have a better relationship with their money. Understanding the changes and rules that govern your investments and investing strategies is one part of that relationship. Reach out and see if we can help you info@ariesfoundation.org
or visit our website www.ariesfoundation.org
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